PENNWEST.COM TSX PWT NYSE PWE Analyst Day June 2017
Agenda 1:00 1:05 Welcome Paul Surmanowicz, Capital Markets Lead 1:05 1:15 Introduction 4 David French, President and Chief Executive Officer 1:15 1:40 Our Cost Journey 10 Tony Berthelet, VP, Development & Operations 1:40 2:15 The…
Introduction
What Will We Discuss Today Transformed into an efficient and entrepreneurial intermediate E&P in the last 4 years Our Cost From 30 dispersed assets to laser focus on 3 top tier plays Journey Refined processes and reduced costs to…
What a Difference 4 Years Have Made Penn West Circa 2013 Obsidian Energy 30/5.5 3/1.7 areas of operation/ areas of operation/ million net acres million net acres 24 2.5 floors floors 15 5 executives executives 2,000 300…
What Obsidian Energy Means to Us The name honours that our foundation is a natural resource that is honed to support the good of mankind. To us, the name, Obsidian Energy, reflects that we will build a bright future shaped by discipline…
Penn West Management David French Andrew Sweerts President and VP, Production & Chief Executive Officer Technical Services David Hendry Mark Hodgson Chief Financial Officer VP, Business Development & Commercial Tony…
A Foundation of Strong Technical Leadership Amanda Reitenbach Jay McGilvary Development Manager, Development Manager, Cardium & Deep Basin PROP & Esther Development Managers have extensive experience in waterfloods, heavy oil,…
1. Our Cost Journey
Our Cost Journey Key Takeaways Balance sheet urgency drove PWT journey to the new world Restructured High-graded portfolio from 30 dispersed assets to 3 key assets and Focused Now a right-sized business for a 30,000 boe/d nimble…
Our Journey to the New World 150,000 2013 Production (boe/d) Adrift at Sea 100,000 2014 2017 Trouble on the Horizon 2015 The New Taking on World Water 50,000 2016 Righting the Ship - 2013 2014 2015 2016 Q2…
Adrift at Sea: 2013 Board and leadership changes to initiate a restructuring plan Investment spread across dozens of areas spanning four provinces No investment concentration and lack of focus Peace 150,000 River 2013…
Trouble on the Horizon: 2014 Cautiously started to refocus and sell assets Price collapse late in the year increased the urgency to restructure Opex improvement initiatives kicked off in non-core assets Peace 150,000 River…
Taking on Water: 2015 Continued low oil prices forced major asset dispositions New technical team brought in with specific waterflood experience to focus the Company back on the Cardium Opex and capital cost savings initiatives…
Righting the Ship: 2016 through Q1 2017 Crude oil prices bottomed in Q1 2016 Debt overhang resolved with Saskatchewan sale and total dispositions proceeds of 1.5 billion Back to work in H2 2016 successfully delivering 3,000 boe/d of…
Our High-Graded Portfolio: The New World Restructuring complete, new CEO at the helm Healthy balance sheet Focused technical team Assets poised for sustainable growth T83 T82 Peace River R19 Penn West land Tuck-in…
Driving a Capital Efficiency Step-Change The largest driver to reduce capital costs is reducing the time to drill and complete each well Minimize the flat time maximize the use of rig hours for drilling Uptime Break every job down…
Raised our Game in the Cardium Cardium Construct, Drill, and Complete Costs 1,000 Cost changes from improved processes, including (i) optimizing water handling for 890 completions, (ii) energizing frac fluids to assist 900 with…
Best in Class Per Well Cardium Costs PWT has the lowest drilling costs across the Cardium 500 450 430 400 350 Cost per meter (/m) 300 260 250 200 150 100 50 0 PWT Peer 1 Peer 2 Peer 3 Peer 4…
Raised our Game in Peace River Peace River Construct, Drill, and Complete Costs 300 250 250 Step change in Peace River with costs down 60% largely due to (i) multi-leg laterals, (ii) open hole vs. slotted liners, and (iii)…
Operating Cost Step-Change Historical Operating Costs (/boe), excluding benefit of Peace River carry Current PWT Properties Only 22.00 21.52 35% per unit opex savings since 2013 on 20.00 our current properties; excludes the…
Top 3 Opex Categories Drove 75% of Total Savings 2013 vs. Current Opex (/boe) 4.50 4.60 4.30 Power, Fuel & Chemicals 3.30 Consolidated vendor list to manage spend 2.80 Moved from long-term fixed price power to 2.10 variable…
Operating Costs Down Across All Areas Translates to annual operating cost savings of 80 million 30 Limited spend on Legacy areas over past 3 years presents opportunity to reduce 25 costs in 2017+ 25 23 22 20 21 21 20…
How Do We Continue the Journey Power, Fuel & Chemicals Crimson Power Project Implement de-centralized power generation Estimate 3MM in 2018 power costs as a power hedge Install Power Generation Units in H2 2017 Current projects…
Our Cost Journey Key Takeaways Balance sheet urgency drove PWT journey to the new world Restructured High-graded portfolio from 30 dispersed assets to 3 key assets and Focused Now a right-sized business for a 30,000 boe/d nimble…
Cardium Key Takeaways More acreage than the 2nd and 3rd largest land holders combined Cardium De-risked position with 2.5 - 3 billion bbls OOIP in the sweet spot is our of the reservoir Foundation Low decline, light-oil, with FCF…
Penn West Has a Dominant Cardium Position R10W5 R5 PENN WEST LAND Best and largest land position in the core PENN WEST UNIT LAND PRODUCING WELL of the Cardium trend to deliver Carrot Creek CARDIUM TREND Easyford unequaled upside…
Cardium is a Free Cash Flow Machine Cardium 5 Year Plan (MM) High-netback light-oil production creates NOI Capital Spend Free Cash Flow an engine of Free Cash Flow 300 70MM of FCF in 2017 increasing to 100MM in 5 years 225 Funds…
Waterflooding is a Proven Concept R10W5 R5 PENN WEST LAND Best Cardium reservoir falls within PENN WEST PRODUCING WELL INJECTOR the boundary where porosity 8% POR 8%, PERM 0.2mD BEST QUALITY RESERVIOR and permeability 0.2 mD…
Tremendous Potential with Consistent Injection 120% In areas where waterfloods were maintained, recovery factors 35% and high watercuts show success of waterfloods 100% NPCU 1 Bear Lake A Lease Lobstick Easyford Carrot Creek…
Recovery Rates 30% are Very Achievable Hz infill drilling in PCU 9 BEFORE 2017 2018 DRILLING PROGRAM 2017 program will 2014-2015 targeted drill 3 Hz well large remaining patterns supported OOIP in areas that by offsetting had not…
Four Cardium Development Types TYPE I TYPE II Hz Producers, Vert Injectors Hz Injector Conversions A pattern is made up of Convert existing horizontal one horizontal producer producers to injection that is supported by 3 vertical…
Pembina Integrated Development Details 160 Development focused on Type Response in 6-9 months with an I patterns made up of Hz 140 initial increase followed by producers and 3 Vt injectors much lower decline 120 Production…
Willesden Green Integrated Development Details 350 Development focused on Type 300 I patterns made up of Hz producers and 3 Vt injectors 250 Integrated waterflood approach Production (bbl/d) 200 results in lower declines from…
Improving an Old Idea with New Technology Better point control of water injection Vertical Lower capital and workover costs vs. competing technologies Injectors Improved flexibility when dealing with breakthrough Reduces…
The Problem with Horizontal Injectors Fiber Optic Temperature Log Valleys indicate points of injection Valley indicates shut-in during logging Temperature (oC) Time Depth (mKb) Hz injector behaves more like a…
Water Injection Effectiveness Improves with Verticals HORIZONTAL WELLBORE VERTICAL WELLBORES Illustrative Temperature Log Illustrative Temperature Log Water flows unevenly; indicated by colder blue area in temperature log More…
Comparison of Horizontal vs. Vertical Injectors 1 Horizontal with Injection 1 Horizontal Injector 3 Vertical Injectors Distribution System DCET Cost* 3.6MM 3.6MM 2.8MM Conversion Cost 0.3MM 1.0MM Well Workover Cost* High (300k -…
NE-SW Orientation Reduces Water Breakthrough PCU 9 Waterflood prediction Water moves along NE-SW from 3D seismic fracture trends from 60+years of water injection Visible in reservoir simulation, production data, and 3D seismic…
Five Signposts of a Successful Waterflood 1. 1 Start of injection 3. 3 Gas Oil Ratio (GOR) decrease Have we got the wells on injection Increasing reservoir pressure expected to result in GOR decrease; response visible Milestone for…
Signpost Demonstration in Crimson Lake Crimson Section 01-042-08W5 Waterflood Project 10,000 2 Hall Plot 100,000 1.4 Oil (bbl/day) 1.2 Injected Water (bbl/day) Cum Pressure Differential 1 GOR (scf/bbl) 0.8 0.6 0.4…
Cardium Key Takeaways More acreage than the 2nd and 3rd largest holders combined Cardium De-risked position with 2.5 - 3 billion bbls OOIP in the sweet is our spot of the reservoir Foundation Low decline, light-oil, with FCF of…
Peace River Key Takeaways 235 net sections in Bluesky depositional area Large High quality pay throughout Area of Mutual Interest (AMI) Potential Modestly booked reserves Non-productive capital costs are minimal in the future…
Our Position is Still Growing R20W5 R15 Large contiguous position in a crude oil resource highly amenable to conventional PennWest 55% Ownership cold-flow production Nampa Recent tuck-in acquisition adds 40 locations vetted and…
Reduced Peace River Opex by 60% Operating Costs (/boe), excluding the benefit of our partner carry 30.00 Negotiated trucking contract 26.00 25.50 Improved run life 25.00 23.00 Higher fuel gas utilization 20.00 Thermal shut…
Step Change in Peace River Operations Significant improvement in per-well metrics in Peace River through a number of internal processes, including simultaneous operations Drilling wells twice as long Drilling 80% faster 60%…
PROP 13-27-83-18W5: Day 0 N DAY 0 February 24, 2017 -15o C SURFACE LOCATIONS 9-29 13-34 16-29 DRILLING Drilling rig moves on site Facilities on site FACILITIES Pin piles 16-29 spuds next day 160m pennwest.com…
PROP 13-27-83-18W5: Day 2 N DAY 2 February 26, 2017 16-29 drilling intermediate hole Tank containment under construction DRILLING RIG WELL 1 DRILLING OFFICES TANK CONTAINMENT CONSTRUCTION FACILITIES STAGING…
PROP 13-27-83-18W5: Day 4 N DAY 4 February 28, 2017 16-29 drilling leg 1 Finish containment Set boards for tank bases TANK CONTAINMENT COMPLETE pennwest.com TSX: PWT NYSE: PWE 54
PROP 13-27-83-18W5: Day 4 N DAY 4 February 28, 2017 DELIVERED TANKS 16-29 drilling leg 1 Tanks arrive onsite Piles complete for structural pennwest.com TSX: PWT NYSE: PWE 55
PROP 13-27-83-18W5: Day 6 N DAY 6 March 2, 2017 TANKS IN PLACE SECOND TANKS ARRIVE 16-29 drilling leg 2 Tanks moving into place Welding completed Second set of tanks arrive pennwest.com TSX: PWT NYSE: PWE 56
PROP 13-27-83-18W5: Day 7 N DAY 7 March 3, 2017 MECHANICAL START 16-29 drilling leg 3 All tanks set Mechanical start pennwest.com TSX: PWT NYSE: PWE 57
PROP 13-27-83-18W5: Day 18 N DAY 18 March 14, 2017 FUEL GAS MECHANICAL SET 16-29 drilling leg 13 Fuel gas building set Mechanical set pennwest.com TSX: PWT NYSE: PWE 58
PROP 13-27-83-18W5: Day 26 N DAY 26 March 22, 2017 0o C DRILLING RIG IN PLACE WELL 2 16-29 13-34 9-29 SURFACE MATTING 16-29 drilling complete March 20th FLARE 16-29 on production March 26th 16-33 drilling intermediate…
Record Setting Drilling in Peace River World record drilling in PROP in 2017 at 400m Harmon Valley 03/13-34-83-18W5 17,073 meters of open hole with a single bit and bottomhole assembly 69 per meter drilled 2017 drilling average of…
Plan to Capture Associated Gas Production R20 R15W5 INDEX MAP Cranberry Lake East 2 Sales E-W P/L 3 8 Flexsteel PWT owned P/L Nova/TCPL Lines Tied into TCPL 9-15 Tidewater Cadotte Slave gas plant Seal North 3-18-84-17…
Peace River Economics, excluding benefit of JV carry 250 Inputs Drill + Complete Total DCET Cost (MM) 1.6 2.8 Production Liquids (bbl) BOE (boe) EUR 310,000 400,000 IP(30 day) 205 215 IP(365 day) 195 210 200 Economic Outputs…
We Have Only Scratched the (Sub) Surface Harmon Valley: 5-20 Seal: 12-32 Seal West: 14-36 Nampa: 15-33 Bluesky 300 255 Nampa 250 PENN WEST LAND ACQUIRED LAND PROP AMI Risked Inventory 200 Harmon Valley 150 5…
Viking Key Takeaways Leading position with infrastructure ownership over entire Esther area Structural Advantage GORR and WI positions in competitor lands Entrenched technical knowledge Innovative completions approach Best…
Structural Advantage in the Viking R10 R5 R1W4 Large contiguous land position criss-crossed and de-risked by Misty GP Compeer GP peer activity T35 Light-oil, high netback shorter cycle wells Infrastructure advantage with key…
Innovative Completions Approach Strong technical expertise from Foam vs. Crosslinked Completions Cost Saskatchewan Viking transferred seamlessly to Alberta side 600 536 500 467 PWT first operator in Alberta Viking to Completion…
Alberta Viking Economics 200 Alberta Viking Economics Inputs Drill + Complete Total DCET Cost (MM) 1.1 1.5 180 Production Liquids (bbl) BOE (boe) EUR 38,000 75,000 IP(30 day) 110 175 160 IP(365 day) 55 95 Liquids (%) 51%…
Unique Growth Lever in Portfolio R3 R1W4 TIER 1 INVENTORY (91 NET WELLS) Misty GP Compeer GP TIER 2 INVENTORY (100 NET WELLS) PENN WEST VIKING LAND 100% WI PENN WEST VIKING…
New Ventures Key Takeaways 2017 program to review sub-Cardium rights is ongoing Legacy 40 locations in the 5 year plan, split between Mannville and Organic Jurassic plays Opportunities Plan to pursue oil-weighted Jurassic plays in…
Legacy Upper Mannville Organic Opportunities F OR M A T ION BELLY RIVER R8W5 R5 PENN WEST LAND On track to drill 3 operated wells COLORADO SHALE PENN WEST OPERATED CARDIUM UNIT in Willesden Green in Q3/17 CARDIUM TREND…
Mannville Fahler B Type Curve and Offsetting Wells 8,000 Type Curve (Mcf/d) 16-25-43-8 offset 16-36-44-7 offset 4-13-45-7 offset Inputs Drill + Complete Total DCET Cost (MM) 3.0 4.0 7,000 Production Liquids (bbl) BOE (boe) 4-13…
3. The Power of the Portfolio
The Power of the Portfolio 235 net sections 4,600 boe/d Peace River 450 net 170 net sections Penn West sections 18,600 30,000 boe/d 2,600 boe/d boe/d Cardium New Ventures 4,000 boe/d 700 net Alberta sections…
The Power of the Portfolio Key Takeaways Balanced Mix of shorter and longer payouts Portfolio Toggle between oilier and gassier projects 70 million of FCF in 2017 and growing Strong Cardium Low-decline light-oil base Foundation…
High Value Inventory That Blends Production Rates Illustrative 2.5x Higher Low hanging fruit return per across portfolio invested Optimization Cardium Type III & IV 2.0x W.Green Type II Pembina Type II 1.5x Higher-decline…
Portfolio Low-Decline Cash Advantage Illustrative Quarterly NOI per 100 invested () 35 Year 5 NOI vs Year 1 NOI (%) 30 70% 60% 25 50% 40% 30% 20 20% 10% 0% 15 Viking Mannville W. Green Peace River Pembina Type…
Resilient Assets in Volatile Commodity Prices Illustrative WTI (US/bbl) and AECO (C/Mcf) Required for 10% IRR (Break-even) 3.00 Current Prices US48/C2.75 Break-evens Cardium Type I break-even WTI price lower than 2.50…
Optionality in Various Price Environments High Gas Prices Leverage Pursue New Infrastructure with Ventures Viking Prospects Low Oil Prices High Oil Prices Build Cardium Waterflood Manufacture Cold Flow in Peace Low…
The Tenets of our Five Year Plan Competitive growth profile through the drill-bit Organic Production Cardium is the foundation with modest growth and high FCF Growth Shorter-cycle projects to toggle growth as needed Self Funded…
Power of the Portfolio Drives Balanced Growth Gas Price 2017-2021 US50/C2.75 US55/C3.00 US60/C3.25 FFO CAGR (%) 3% 12% 17% Oil Price Production CAGR (%) 3% 9% 13% Re-Investment Rate (%) 100% 100% 100% PWT Normalized Free Cash…
Cardium Optionality In All Environments Gas Price Free Cash Flow to fund shorter-cycle projects in Peace River, Viking, and New Ventures Integrated waterflood to allow for modest growth and reduction Oil Price of declines Results in…
Manufacture Cold Flow in Peace River Gas Price Attractive economics remain after JV carry finishes in 2017 Oil Price 5 year plan of 12% production growth CAGR with 80% sustainability ratio Asset Level Free Cash Flow (MM)…
Leverage Viking Infrastructure Gas Price Modest Viking development in current 5 year plan as more capital is allocated to New Ventures Oil Price Short-cycle nature allows for higher or lower pace of development pending New Ventures…
Pursue New Ventures Gas Price 40 locations in near-term inventory for 5 year plan Oil Price To pursue oil-weighted Jurassic plays in 2018 Ability to toggle capital up or down depending on well results Asset Level Free Cash…
Waterfloods Maintain Low Decline While Growing 30% Average current peer decline rate 28% 28% Higher growth scenario not expected to materially increase decline rate 26% 5YP US60/C3.25 24% 5YP US55/C3.00 22% 52% of spend…
Focus on 2017 and 2018 Sustainability 2017 2021 US50/C2.75 US55/C3.00 US60/C3.25 5 Year Plan FFO CAGR (%) 3% 12% 17% Scenarios Production CAGR (%) 3% 9% 13% Re-Investment Rate (%) 100% 100% 100% 2017 & 2018 Development…
What Did We Learn Today Transformed into an efficient and entrepreneurial intermediate E&P in the last 4 years Our Cost From 30 dispersed assets to laser focus on 3 top tier plays Journey Refined processes and reduced costs to best…
Obsidian Energy Disciplined Relentless Accountable
Appendix
Endnotes All slides should be read in conjunction with Definitions and Industry Terms, Non-GAAP Measure Advisory, Oil and Gas Disclosures Advisory and Forward-Looking Advisory Slide 6. What a Difference 4 Years Have Made All figures are…
Endnotes All slides should be read in conjunction with Definitions and Industry Terms, Non-GAAP Measure Advisory, Oil and Gas Disclosures Advisory and Forward-Looking Advisory Slide 72. Legacy Upper Mannville Organic Opportunities…
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